Market is not liking Shenzhen Jinjia GroupLtd's (SZSE:002191) earnings decline as stock retreats 9.8% this week

As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Shenzhen Jinjia Group Co.,Ltd. (SZSE:002191), who have seen the share price tank a massive 75% over a three year period. That would be a disturbing experience. Unfortunately the share price momentum is still quite negative, with prices down 15% in thirty days. But this could be related to poor market conditions -- stocks are down 7.2% in the same time.

After losing 9.8% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Shenzhen Jinjia GroupLtd

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Shenzhen Jinjia GroupLtd moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 15% each year, over three years. This could have some investors worried about the longer term growth potential (or lack thereof).

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Shenzhen Jinjia GroupLtd has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Shenzhen Jinjia GroupLtd will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Shenzhen Jinjia GroupLtd, it has a TSR of -71% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Shenzhen Jinjia GroupLtd shareholders are down 20% for the year (even including dividends), but the market itself is up 6.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Jinjia GroupLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Shenzhen Jinjia GroupLtd (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

But note: Shenzhen Jinjia GroupLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.